Business & Commercial Lawyers

Law FAQ: What is a HEET?

A HEET is a Health and Education Exemption Trust. This time of year many clients are making gifts to their children and grandchildren. They often forget that gifts in excess of the $13,000 annual gift tax exclusion amount will be subject to Tennessee gift tax and affect their Federal Estate Tax exemption amount. However, gifts made for a beneficiary’s health or education paid directly to the provider of services or to the educational institution are statutorily exempt and do not count against the annual gift tax exclusion amount. And there is a code section that specifically authorizes a trust for the beneficiary’s health and education, a HEET.

A HEET enables clients to make completed gifts to beneficiaries for qualified health or education expenses. Gifts to HEETs are not limited to the annual gift tax exclusion amount. HEETs can provide a powerful planning tool for parents or grandparents who want to provide for their younger beneficiaries’ health or education needs, and who don’t want to be limited to annual exclusion gifts, don’t want complexity of more sophisticated gifting strategies, and don’t want to deal with the restrictions of strategies like 529 plans.

If you have questions regarding a HEET or how this trust could benefit your estate plan, please contact our office.

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